RETAINED ASSET ACCOUNTS AND LIFE
INSURANCE:What Consumers Need to Know About Life
Insurance Benefit Payment Options

The death of a spouse, parent, child, partner or other
loved one is a difficult time. In addition to the emotional stress present
during the weeks, months or years following a death, financial burdens may
also arise. Life insurance is intended to assist with these financial
burdens. While life insurance policies provide for a single payment of the
death benefit, policies may also offer other payout options that are
intended to fit your needs and those of your family. The National
Association of Insurance Commissioners (NAIC) suggests you consider the
following information if a life insurance company offers you a Retained
Asset Account as an option to a single payment.

What is a Retained Asset Account?

A Retained Asset Account (RAA) is a temporary repository of funds. The
account’s function is to give you (the beneficiary) the time you need to
consider all of the financial options available. The payment of the total
proceeds will be accomplished by delivery of a “checkbook.” While the
documents you receive might look like a checkbook, it might actually be
drafts which are similar to checks, but different in some ways.

The use of a RAA provides you the flexibility to make the right
decision regarding your long-term financial needs while earning interest
on the life insurance proceeds. You can choose to write one check or draft
to access the entire proceeds at any time. However, you may be able to
earn a higher rate of interest on the life insurance proceeds if you
select a different payout option.

RAAs are generally provided as an option to the beneficiary, however
for some group policies, the employer might have agreed that a RAA is the
only way life insurance claims are settled. If that is true in your case,
you may write a check or draft to transfer the remaining funds as you see
fit.

Key Questions to Ask and Issues to Understand

If you are considering the option of a RAA or are provided one to
settle a death claim, here are some important issues to consider:

What interest rate will be paid on the proceeds, how will the
interest rate be determined and how will the interest amount be credited
to the account?

Will the proceeds be held in a bank, which would make the proceeds
FDIC insured up to the limit permitted by law?

Will the proceeds be held by the insurer, which would make the
proceeds subject to coverage by a state guaranty fund should the insurer
fail?

Will the proceeds be held in a bank checking or an insurer draft
account and what banking services, if any, will be provided?

What services will be provided at no charge and what services will
involve a fee?

Other Payout Options

One size does not fit all and this is why various payout options are
offered. If you choose to initially receive life insurance proceeds
through a RAA, other payment options should be preserved until the entire
balance is withdrawn or the balance drops below a certain dollar amount.
Other payout options may include one or more of the following:

A Single Payment, also known as a “Lump Sum”
Payout: Through this option, you will receive the entire
proceeds in one payment.

Installment Payout for Fixed Amount or Period:
Through this option, you may choose to receive either: a fixed monthly,
quarterly, or annual payment amount selected by you until the proceeds
are depleted; or a fixed monthly, quarterly, or annual payment amount
determined by your insurer for a fixed period of time that you select.

Installment Payout for Lifetime: Through this
option, you will receive fixed monthly, quarterly, or annual payments
determined by your insurer for the remainder of your life.

Interest Only Payout: Through this option, proceeds
are left with the insurance company and you will receive interest
payments which the insurer will pay you on a monthly (quarterly, annual)
basis. If you choose this option, be sure you understand if the interest
rate is fixed or variable and if there are any guaranteed minimums or
maximum limits. Proceeds are passed on to your beneficiaries upon your
death.

Other Tips

If you are the beneficiary of a life insurance policy, contact the
insurance company in a timely manner after the death of the insured. Be
prepared to provide a death certificate to initiate the claims process.

Always obtain the necessary contact information for your insurance
company, such as a phone number and address, where you can obtain
additional information and answers to your questions.

Make sure you read and understand all information the insurance
company sends to you.

Assess your financial needs and tax status.

Take your time in determining the right payout option for you. You
should not be pressured to act quickly.

If you need help, consult a trusted financial or tax advisor.

More Information

If you have questions about RAAs or other life insurance proceed
options, contact your state insurance department. Visit www.naic.org for contact information
and Web links to your state insurance department.

Get smart about your insurance needs! For more information about auto,
home, life and health insurance options – as well as tips for choosing the
coverage that is right for you and your family – visit www.InsureUonline.org.

August 2010

About the NAIC

Formed in 1871, the National Association of Insurance Commissioners
(NAIC) is a voluntary organization of the chief insurance regulatory
officials of the 50 states, the District of Columbia and five U.S.
territories. The NAIC has three offices: Executive Office, Washington,
D.C.; Central Office, Kansas City, Mo.; and Securities Valuation Office,
New York City. The NAIC serves the needs of consumers and the industry,
with an overriding objective of supporting state insurance regulators as
they protect consumers and maintain the financial stability of the
insurance marketplace. For more consumer information, visit insureUonline.org.